Jamie Dimon: Head or Tails

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J.P. Morgan boss--Jamie Dimon

J.P. Morgan boss–Jamie Dimon

Legends often die a slow, painful death on Wall Street with an inevitable collapse at the end.  That was the story for Lehman Brothers, Bear Stearns, and a host of others.  It is also a pattern that seems to be repeating itself with Jamie Dimon, the venerable Chairman and Chief Executive Officer of JP Morgan, considered by many to be the standard bearer for blue chip banking firms.

Like so many others, however, JP Morgan likely only survived The Great Recession due to the largesse of the American taxpayers.  Without trillions in direct and indirect government assistance, JP Morgan would not be in its present position, up 20.79% for the last year and 13.00%  for 2013.  Even with that equity price performance, there is still a shareholder movement to unseat Dimon from one of his executive posts.

This vote would be considered “disruptive  according“ to a shareholder letter from the board of directors.  But is gaining momentum, particularly with the recent California lawsuit. For Dimon to be removed would be a tremendous loss of face, confidence and support from the investment community for one who is considered by many to be the top head of a bank in the United States.

Jamie Dimon has always pushed this supposition and effectively was his own manager.

In a recent interview with the Huffington Post, he boasted that, “This bank is anti-fragile, we actually benefit from downturns ,”  That certainly happened in The Great Recession…but only with substantial taxpayer assistance!

Over the course of The Great Recession, JP Morgan:

*was able to  buy Bear Stearns in a government-backed at fire sale prices:

* received $25 billion in TARP funds;

* billions more in low interest subsidies: and

a permanent subsidy was put in place due to the perception that the government will protect the bank.

All that, and more, was provided by the government!

A recent Bloomberg View study valued this government subsidy for JP Morgan at $17 billion.  Ironically, or tragically, that is close to all of the bank’s profits. According to the Bloomberg report, JP Morgan receives the largest subsidy of any bank.

But that taxpayer has not protected JP Morgan in the aftermath of The Great Recession.

The “London Whale” trading scandal cost the bank billions.  While Dimon stated that he thought he handled it very well, the market punished the share price of JP Morgan.  While the stock price has obviously recovered, the investor view of  Dimon as an executive has not.

This is currently threatened by the lawsuits filed by the state of California.  In the article, “Can California Take Down JP Morgan in Court” by Emily Coyle, it is reported that JP Morgan has, “has been sued in California Superior Court with accusations that the bank used questionable documents, took shortcuts in court and used erroneous evidence to ensure its success and sue at a preposterous pace. The New York Times reports that “court records show JPMorgan filing 469 lawsuits on a single day.”

This could not be worse timing for Jamie Dimon in his bid to retain both his privileged positions of peerless power, influence, and prestige.

After all, leading one of the top banks in the world is a big job and when you combine both positions, it might get out of control.    “We think there is a particularly compelling case at J.P. Morgan [to split the roles] because the time requirement for the chairman of the board is or should be a full-time job,” said Lisa Lindsley, Director of Capital Strategies at the American Federation of State, County and Municipal Employees, which owns about 78,000 shares. “It’s not realistic for someone to do two full-time jobs.”

However, not too long ago, the board of directors just voted unanimously in support of Dimon.  A letter to shareholders from two senior members of the JP Morgan board of directors, Lee Raymond and William Welend, chairman of the corporate governance and nominating committee, stated that the current governance structure “is working effectively.”

There is no doubt that the California lawsuits caught the board of JP Morgan unaware.  Based on the scale of the pleadings filed in court against JP Morgan, civil RICO charges are certainly not out of the realm of possibility.  In addition, it is also plausible that many more lawsuits from states could be forthcoming.

If there is one thing Wall Street hates, it is uncertainty.  That is what results from pending litigation.  That is why Phillip Morris settled when it had never lost in court.  It could also be why Jamie  Dimon finds himself on the losing end of a vote at the May 21st annual meeting.

 

Anna Timone (195 Posts)


Comments

  1. Alex Leone says:

    Looks like u were wrong, and this is a hatchet job!

    Not only did Dimon survive, the reason JP Morgan survived the financial crisis was due in part to the fact that the bank steered clear of cdos of subprime loans. and the tarp funds were mostly used to absorb Washington Mutual and Bear Stearns. Those moves saved billions for share holders and taxpayers. The whale of London loss was a tiny fraction of the firms revenues. RICO? Not gonna happen.

    And you call yourself a professional? How about posting an apology, and next time write about something u know about – which seems to be nothing. And you’re not much of a writer either. Leave the writing to the pros, and keep your day job. Really?

    • Terrence Richardson says:

      Those who write posts with so many grammatical errors should not offer snarky commentary about someone else’s writing. Take an English class when you get the chance.

  2. Liked your all articles and blogs this one was awesum too. The way your blog tells each and everythng in deep is superb. Continue your great work

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